Making Tax Digital – What we have learned from the first quarter

The first quarterly update under Making Tax Digital (MTD) for Income Tax fell due on 7 August 2026, covering the period from 6 April to 5 July for most sole traders and landlords with qualifying income above £50,000.

With that first deadline now behind us, a clearer picture is emerging of how the new system is working in practice and where the pinch points are likely to sit as we move towards the next quarterly update on 7 November.

The numbers tell part of the story

HMRC had expected around 864,000 sole traders and landlords to be mandated into MTD from April. In the end, roughly 570,000 signed up and just over 436,000 filed a first quarterly update.

That gap matters, as it means that a significant proportion of the expected population has either not signed up at all or signed up without yet submitting a return, which is why HMRC has confirmed it will begin signing up outstanding taxpayers itself from this month.

Where the friction has been

For firms and clients who have been through the process, a few recurring issues have stood out.

• Software onboarding took longer than expected, particularly for clients moving from spreadsheets to bridging software or a full bookkeeping package for the first time.
• Businesses with more than one trade or property portfolio needed clear, distinguishing names and descriptions set up in software from the outset, since these are far harder to correct once HMRC has processed a submission.
• Some clients treated the update as a full tax return and tried to make accounting adjustments before sending it, when in fact it is simply a summary of income and expense totals for the quarter.
• Digitally excluded clients and those with genuinely complex affairs needed early conversations about exemptions, rather than leaving the question until the deadline was close.

What this means for the next quarter

There are no penalty points for late quarterly updates during the 2026/27 tax year, which has taken some of the pressure off this first cycle, but it is still the legal duty of taxpayers, even if there is no immediate penalty.

That grace period will also not last indefinitely and the record-keeping habits built now will matter once penalties do apply.

If you are still finding your feet with MTD, or have not yet submitted your first update, get in touch.

We can help you choose the right software and get your records in order well ahead of the next deadline.